What’s the Secret behind Luckin Coffee’s Success so Far?

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Almost overnight, Luckin Coffee has made waves across China’s biggest cities. The new coffee brand and its blue cups seem to be everywhere. Promotion has been aggressive, both online and offline, with an abundance of advertisements, WeChat moments, and website banners on a variety of sites. Since the start of the year, the Beijing-based startup has served more than five million cups of coffee to more than 1.3 million customers in 13 Chinese cities.

 

 

Coffee has not been as popular in China as it is in other countries like the United States and Europe. Tea and hot water are more well-liked, but this trend has been changing over the years. Yet, despite the coffee shops popping up — which all offer a variety of coffees, flavored teas, and snacks — none has managed to draw as much attention and expand as quickly as Luckin Coffee. Founded in November 2017 by Qian Zhiya, the former director and deputy general manager of the care service provider Ucar, the company opened more than 300 stores just last year and plans to open 200 more by the end of this month. It has even grown faster than Starbucks, its biggest coffee brand competitor, which opened approximately 85 stores per month in 2017 in the China and Asia-Pacific markets.

So, what has set this coffee house apart from others? It is the company’s encompassing and aggressive marketing strategy. Luckin Coffee used a variety of focused online and offline marketing channels, collected their own data through their own app to cater to their specific audience, and implemented new, trendy techniques for this business, like delivery service. Additionally, besides being cost-efficient and pricing a cup of coffee competitively, the new retail made coffee much more accessible.

Luckin Coffee’s overall marketing strategy has been extremely effective so far. In terms of offline marketing, they focused on urban office buildings and residential areas for brand exposure. They promoted by placing advertisements almost everywhere. Furthermore, they used famous celebrities to endorse the brand, including the beautiful Chinese actress Tang Wei and the handsome Chinese actor Zhang Zhen. Both of these famous spokespersons are well-liked, of outstanding quality, and ideal for targeting young, white-collar workers, which is Luckin Coffee’s main customer and targeted audience.

For online marketing, Luckin Coffee’s strategy aggressively engaged social media users. They built a standalone app, not a mini-program (avoiding WeChat’s policies) and provided a free cup of coffee to anyone who signed up on their app. They also offered an extra free cup of coffee to anyone who referred a friend. Besides establishing their brand, directly targeting customers, and collecting user data, this marketing approach generated a flurry of WeChat moments posts. In addition, Luckin Coffee offered several promotions, such as buy two get one free. Strategically, when friends or coworkers purchased together, the average fee for one cup of coffee dropped in price. These deals effectively resulted in increased customers and better managed costs.

Perhaps the biggest difference in Luckin Coffee’s marketing strategy is their mobile app, which offers multiple benefits. All orders are made through the app and there is a service delivery option. Customers can either pick up their order at a nearby Luckin Coffee shop or have it delivered in 30 minutes for a nominal fee. Unlike the other coffee houses, Luckin Coffee made the most of the Chinese people’s keenness for food delivery by making their coffee much more convenient. They signed a deal directly with a delivery company, instead of collaborating with food delivery apps, which was more economical. To be even more cost-effective, the retailer established three different types of stores: cafes for people to socialize while enjoying a cup of coffee, stores for picking up pre-orders, and stores for delivery service only. Moreover, they do not take money since all orders are placed through its app, which reduces the pressure for stores to manage cash and increase the rate of table turnover. As a bonus of this approach, every initial order represents a new registered user.

 

 

According to Luckin Coffee’s CEO Qian Zhiya, the “Chinese coffee market is on the verge of explosive growth” and the company wants to create “a new high-quality coffee retailer.” Luckin Coffee’s brand and business model have taken shape and its continued level of success is one to watch. As they focus on promoting affordable and convenient coffee among Chinese consumers, they will likely continue the special offers to help develop the habit of drinking coffee regularly, to build customer loyalty, and to preserve brand recognition among their competitors.

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